Refer to the prices of Japanese auto imports under the VER (Figure 9-5) and answer the following:
Question:
Refer to the prices of Japanese auto imports under the VER (Figure 9-5) and answer the following:
a. What component of the price of imported automobiles from Japan rose the most over the period 1980 to 1985?
b. Sketch how Figures 9-5 and 9-6 might have looked if the United States had applied a tariff to Japanese auto imports instead of the VER (with the same level of imports). In words, discuss how the import prices and U.S. prices might have compared under a tariff and the VER.
c. Which policy—a tariff or the VER—would have been least costly to U.S. consumers?
LO.1
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